Everything Crazy

Walmart CEOs Concealed Evidence Of Vast Bribery Scandal

Each Black Friday we hear all about Walmart, from the jaw-dropping discounts that make competing customers resort to gunplay – to the deaths by trampling. This year, we’ve been hearing about coordinated strikes, walk-outs and protests as Walmart workers have begun to resent the depths of their corporate exploitation. But we don’t hear about the rampant corruption uncovered in Walmart’s expansion operations as multiple bribery probes continue to widen.

Walmart is the biggest retailer in known history, employing one million US workers and making $3.63 billion in profits just in the most recent quarter. Obviously, a business this size will hold a lot of sway in media where they are regular advertisers. Maybe that’s why we’re not hearing about a global bribery scandal which should be leading to perp walks, but so far, is barely being reported.

Kudos to the Boston Globe for updating the story that David Barstow quietly broke in the New York Times last April. In brief, it explained how Walmart had systematically bribed officials to fast-track expansion in Mexico.

After a 10 year Walmart official blew the whistle, an internal investigation ordered by Walmart’s top executives buried the affair for some seven years. How? They simply made an official involved in the bribery allegations responsible for the investigation. Not surprisingly, he reported no wrongdoing. Management even promoted the chief executive of the Mexican division to vice chairman.

This alleged cover-up implicates senior management including two CEOs who knew – or should have known – their financial records showed tens of millions in payments for local “gestores”, Mexican officials who greased the wheels in obtaining permits, zoning approvals and environmental waivers. Cutting through bureaucratic red tape, Walmart’s explosive growth “south of the border” quickly made them also Mexico’s largest private employer with over 2,000 new stores opening in 12 years.

The SEC and DOJ are finally taking an interest in the matter, but Walmart was already able to “get in front” of US law enforcement to conduct new “investigations” of their own, hiring 300 lawyers and accountants including a noted former FBI official. Walmart reported spending $100 million so far this year trying to deal with the scandal.

Any bribe made to a foreign official is a violation of the Foreign Corrupt Practices Act. Walmart finally admitted last week that internal FCPA probes have already commenced in the Mexican affair. But their investigators quickly found the same “business model” for rapid expansion overseas was also used in Brazil, China and India where hundreds more stores opened.

It’s no secret that bribes are common in the developing world, but US companies are held to higher standards and strict federal laws. The Securities and Exchange Commission just last week published fresh, clear cut guidelines for interpreting the FCPA to spell out what constitutes an illegal bribe. Walmart’s admissions came one day later.

We reported last April that Walmart’s goal of 20% market domination nationwide is bad news for Main Street USA, small business owners and taxpayers. Areas that welcome Walmart see net job losses and lost wages as supermarkets, local shops and smaller retailers are all displaced. As they export profits to their Arkansas headquarters, communities also feel a drain on social services because Walmart’s refusal to provide healthcare for workers shifts millions in costs to taxpayers.

Walmart is also well known to have coached workers to apply for government aid such as food stamps, WIC or Section 8 housing subsidies. Walmart’s “poverty wages” force taxpayers to choke up an extra $3.6 billion per year in welfare and Medicaid to make up the difference, even as the company rakes in profits over $15 billion per year.

Already known to have squelched evidence of widespread bribery, Walmart is this time pledging greater oversight and background checks for intermediaries. They have suspended a handful of workers from their India division, but they will likely try to protect their older, white employees.

This might be hard because current CEO Michael Duke and former CEO Lee Scott both signed documents affirming any evidence suggesting fraud was disclosed. As last week’s disclosures show, it was not.

What remains to be seen is how and when the Obama administration might react. Barstow’s NY Times article describes a wealth of first-hand evidence that points squarely to upper management, drunk with greed as foreign expansion boomed. But similar cases involving Tyson Foods, Halliburton and Siemens did not result in jail sentences for individuals, instead were settled via secretly negotiated fines in “deferred prosecution” agreements made chic by the Bush administration.

The late Senator Arlen Specter fought this practice in Senate hearings, noting “fines are added to the cost of doing business…going to jail is what works to deter crime”. According to the NY Times in “Lots of Bribes, but Little Jail Time“, Walmart saw Tyson’s top execs escape criminal indictments for bribing Mexican officials, and simply decided to sweep their scandal under the rug. When Obama lined his incoming cabinet with Wall Street attorneys, little changed.

Thus, it is already predicted President Obama, Attorney General Eric Holder and SEC chair Mary Schapiro will let Walmart’s CEOs skate without criminal prosecution. The current administration is expected to continue to sell justice, and our nation’s #1 employer, knowing Obama always needs to pad jobs numbers, is likely to play hardball.